Corporations and Takeovers

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Hi,

Interesting questions! Let's take a closer look at information from various sources, which you can draw on for your final copy. I also attached three supplementary articles which are referred to in this response.

RESPONSE:

1. Why are corporations the dominant form of business in the United States?

Corporate takeovers (e.g., mergers and acquisitions) occur frequently in the United States, Canada, United Kingdom and France, and become prominent in the seventies and eighties in the United States. In comparison, they happen only occasionally in Italy because larger shareholders (typically controlling families) often have special board voting privileges designed to keep them in control. They do not happen often in Germany because of the dual board structure, nor in Japan because companies have interlocking sets of ownerships known as keiretsu, nor in the People's Republic of China because the state majority-owns most publicly listed companies (Wikipedia.com).

There is some empirical basis for the idea that reducing taxes was at least a partial motive for takeovers (http://www.econlib.org/library/Enc/TakeoversandLeveragedBuyouts.html). However, corporations are a product (and/or consequence) of the capitalism and free trade policies e.g. corporations get stronger in these free market environments.

Thus, there are both economic and regulatory factors combined to spur the explosion in large takeovers. The three regulatory factors were the Reagan administration's relatively laissez-faire policies on antitrust and securities laws, which allowed mergers the government would have challenged in earlier years; the 1982 Supreme Court decision striking down state anti-takeover laws (which were resurrected with great effectiveness in the late eighties); and deregulation of many ...